SAP: Oddo downgrades to 'neutral' - FCF a big disappointment
(CercleFinance.com) - An analyst at Oddo BHF today said that he is downgrading his buy rating on the German SAP stock, to neutral, after a big disappointment in terms of FCF, which reached to 2.
9 billion euros, against 3.1 billion euros expected.
Regarding the group's 2019 guidance, the broker considers this as "satisfactory," with growth naturally driven by the Cloud. However, SAP has announced a major restructuring plan, with approximately 4,400 redundancies on the cards, or 5% of its total workforce. In particular this will be to enable the group to refocus its R&D efforts on Cloud products. This restructuring plan will mean costs of between 800 million and 950 million euros in 2019: most of the savings from this plan will be reinvested by the group. This plan, which is similar in scale and rationale to that of 2015, raises the question of SAP's need to restructure in a regular manner, every 4 to 5 years, with exceptional costs that would represent an average of 220 million euros per year over the period 2015/2022e, and even beyond, Oddo BHF says.
The analyst has also significantly cut his target price for the share from 121 euros to 98 euros: this means limited upside potential of 9%.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
9 billion euros, against 3.1 billion euros expected.
Regarding the group's 2019 guidance, the broker considers this as "satisfactory," with growth naturally driven by the Cloud. However, SAP has announced a major restructuring plan, with approximately 4,400 redundancies on the cards, or 5% of its total workforce. In particular this will be to enable the group to refocus its R&D efforts on Cloud products. This restructuring plan will mean costs of between 800 million and 950 million euros in 2019: most of the savings from this plan will be reinvested by the group. This plan, which is similar in scale and rationale to that of 2015, raises the question of SAP's need to restructure in a regular manner, every 4 to 5 years, with exceptional costs that would represent an average of 220 million euros per year over the period 2015/2022e, and even beyond, Oddo BHF says.
The analyst has also significantly cut his target price for the share from 121 euros to 98 euros: this means limited upside potential of 9%.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.